MBA & MM Theses

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    The relative persistence in performance of South African Unit Trusts
    (2014-01-21) Midgley, Mark
    A considerable amount of research has been undertaken in South Africa and internationally to ascertain whether unit trust funds have outperformed their respective benchmarks and if fund managers have been able to achieve persistently superior returns for the investors. This research is aimed at determining whether there is persistence in performance of unit trust funds within South Africa over the periods of June 1988 to January 2013 and investigates the ability of unit trusts to retain their ranks as a winner or loser from one period to the next. Based on a review of available literature on persistence in performance of unit trust funds, two research questions were formulated as part of this study. Firstly, the research aims to determine whether or not persistence in performance exists in South African unit trusts and secondly whether persistence in performance exists in unit trusts relative to a style risk-adjustment benchmark over a period of time. The population tested for this study consists of all the actively managed South African equity funds over a 24-year period. A computer model was used to develop a fund trading strategy for Winner- and Loser-only unit trusts funds, using monthly fund price data sourced from I-Net Bridge. The results of the computer simulation yielded a fund trading strategy which defined the optimum portfolio size, look-back (L) period and holding (H) period to maximise fund performance. The study showed that unit trust funds were able to outperform the benchmark and in most cases were able to outperform the market. In general, winner-only funds tended to outperform loser-only funds. In summary, the research concluded that persistence in performance exists in South African Unit Trusts, and that these funds are able to outperform style riskadjustment benchmark over a period of time.
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    DIVERSIFICATION IN PROPERTY UNIT TRUSTS
    (2011-10-07) Kollenberg, Paul Leon
    This research report investigates the Property Unit Trust (PUT) sector to assess if there are risk-sharing benefits to be obtained in building up a property portfolio. The report demonstrates that property trusts with diversified acquisition strategies achieve better risk sharing characteristics than those found in focused property funds. The ‘value at risk’ for each of the PUT’s was plotted over a 5-year period against the underlying asset value of the properties. This quantified the factor by which the ‘value at risk’ increased as the asset value increased. The values for each PUT were compared to the index for the sector, as well as separate indices for focused and diversified funds. The investigation demonstrated that property portfolios do provide an opportunity for risk sharing, and that diversified funds provide greater risk sharing possibilities. This finding is crucial to asset managers who assemble property funds in that it provides insight in combating portfolio volatility.
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    THE IMPACT OF THE COLLECTIVE INVESTMENT SCHEMES CONTROL ACT ON UNIT TRUSTS
    (2011-10-07) MAZHAKATA, JOSHUA
    The Collective Investment Schemes Control Act (2002), (CISCA) was promulgated into law on 12 December 2002 and became effective on 3 March 2003. CISCA introduces a number of changes to bring the Collective Investment Schemes in line with international practice. It replaces the Unit Trusts Control Act (1981) and the Participation Bond Act (1981). Three of the changes introduced by CISCA were investigated in the current study. CISCA removes the requirement to retain 5% of the fund‟s value in liquid assets. It allows the funds to fully invest in warrants and index tracking instruments. Securities by one concern can now hold the maximum of 5% or 10% (depending on market capitalisation) or 120% of the share‟s free float weighting in the relevant index, with an upper limit of 35% for any one share. An ex post study was conducted to establish what changes CISCA would have had on returns, had the legislation been introduced ten years prior to March 2003. A passive portfolio management strategy with a holding period of five years was used in the study. The study showed that investment in the Top 40 Tracker Fund yielded inferior returns compared to those for a unit trust fund. There was no statistically significant difference in returns for a fund with 5% cash and 95% equity, and a fund that had invested 100% of its assets in equity. However, the 100% equity fund yielded a marginally higher return of 1.1%. The changes introduced by CISCA are commendable as they create favourable conditions for investing in the unit trust industry.
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    Use of the Efficient Frontier Method In Unit Trust Portfolio Selection
    (2011-07-14) Mugivhi, Thomas Vhutshilo
    This paper investigated whether optimal market portfolios delivered returns superior to those of existing unit trust portfolios over a five-year period. Three sets of unit trust portfolios were used for the research and they represented the Large Capitalization, Mining & Resources, and Financial & Industrial sectors of the JSE Securities Exchange. For each of the three sectors, an optimised market portfolio was constructed using the efficient frontier method, and these were compared and contrasted with existing portfolios. The optimised market portfolios consistently resulted in higher Sharpe ratios compared with existing unit trust portfolios over the period under review. Assertion that optimal market portfolio produce returns, which are superior to those of existing unit trust portfolio was confirmed
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    Comparative performance of
    (2011-05-19) Mmolawa, Obakeng Noah
    Exchange traded funds have generated a great deal of interest in markets where they have been introduced including in the South African investment market. In South Africa exchange traded funds are still relatively new and the range available is fairly narrow, however their popularity is growing at a fast rate. Since the introduction of exchange traded funds in South Africa, starting with the listing of the Satrix40 in November 2000, exchange traded funds have emerged as a viable investment alternative to unit trust funds. Given that exchange traded funds are available at low cost, and that they are likely to outperform active funds of similar risk, the question is: would an investor be better off investing in an exchange traded fund than in a unit trust portfolio. The purpose of this research was to compare the performance of an aggregate domestic general equity unit trust fund, to that of the Satrix40, an exchange traded fund, and to determine if an investor would have been better off investing with the aggregate general equity unit trust manager or in the Satrix40. Results from the comparative study of performance indicate that, after costs, the cumulative average abnormal returns of the Satrix40 are significantly more than those for an aggregate general equity unit trust portfolio. This suggests that an investor would have been better off investing with the Satrix40.
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    A COMPARISON OF VALUE- AND TIME-WEIGHTED UNIT
    (2011-04-12) Gerber, Eugene
    Unit trust returns are published and quoted regularly in various media publications. These returns, calculated as Time-Weighted Rates of Return, do not reflect the actual returns that investors perceive. The timing of capital flows into and out of the funds affects the real returns that investors experience, and can be calculated using Value-Weighted Rates of Return, also referred to as Dollar-Weighted Rates of Return. This research report compared the Dollar- and Time-Weighted Rates of Return for 60 South African unit trusts from the second quarter of 1998 to the second quarter of 2005. The actual returns were compared to expected returns based on random capital flows, and to returns based on constant and inflation linked capital flows. If investors were creating superior returns by moving capital into and out of a unit trust during periods of positive and negative returns respectively, then they will have an actual return that is higher than the published return of the fund, i.e. the Dollar- Weighted Rate of Return will exceed the Time-Weighted Rate of Return. The findings indicate that investors are destroying value by actively timing their capital flows. The research also showed that a large percentage of the general investor community would have perceived larger returns by following a constant investment strategy.